What it means
Xero is a general ledger, the same job QuickBooks Online does. Your Xero organization holds the chart of accounts, every entry and every report. Departments or projects go in tracking categories rather than extra accounts. Money from the other tools on these pages ends up as entries here.
Bank feed lines are reconciled by matching each one to an invoice, a bill or a new transaction. Some costs need an entry before any money moves. In December, a contractor did $3,000 of work but won't invoice until January. A manual journal accrues it, debiting contractor expense and crediting accrued liabilities, so December carries December's cost.
When the bill arrives in January, it's entered as a bill and the accrual is reversed. The two cancel in January, so the cost is counted once, in the month the work happened.
Reconcile every bank and card account, review the reports, then set a lock date. Xero has two. One stops everyone except advisers from changing earlier transactions, and the other stops all users. Only someone with the adviser role can set either.
A common setup locks out everyone but advisers once a month is closed, then locks all users once the year is signed off.
The contractor entry is the accrual basis at work, and accrued expenses explains it in more detail. Period locks covers lock dates. QuickBooks Online does the same job.
Why it matters. Same deal as QuickBooks. The books stay in your Xero organization, and anyone you give access to can open them.
Xero is one of the two ledgers we work in. The other is QuickBooks Online. Your books stay in your own file.
The entry, worked
A contractor did $3,000 of work in December but won't invoice until January. The cost is accrued at December month end.
| Account | Debit | Credit |
|---|---|---|
| Contractor expense | $3,000.00 | |
| Accrued liabilities | $3,000.00 | |
| Total | $3,000.00 | $3,000.00 |
December carries the cost of December's work. When the bill arrives in January, the accrual is reversed so the cost isn't counted twice.
Common questions
What is a lock date in Xero?
A date on or before which transactions can't be added or changed. Xero has two: one that stops everyone except advisers, and one that stops all users. Only someone with the adviser role can set them.
Should I use QuickBooks or Xero?
Both are proper double-entry ledgers and both work for a startup. Pick the one your accountant knows best, then keep it closed every month.
Can Xero reverse an accrual automatically?
Yes. A manual journal has an auto-reversing date. Date the accrual on the last day of the month and set the reversal for the first day of the next, and Xero posts the reversing journal for you.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
- Form 1099-NEC for startups: threshold, deadline, e-filingWho gets a 1099-NEC, the new $2,000 threshold, why a W-9 comes first, what goes on a 1099-K instead, and the deadlines, penalties and state copies.Guide · 7 min
- W-9s and backup withholding: a vendor onboarding guideWhen to ask for a W-9, how IRS TIN matching works, and what happens when a vendor won’t give you one: 24% backup withholding, owed by you.Guide · 6 min
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.Guide · 7 min
- Balance sheet explained for startupsAssets equal liabilities plus equity. What each startup line means, from deferred revenue to the SAFE and the accumulated deficit, and why it must balance.Guide · 7 min
- General ledger and double-entry bookkeeping, explainedHow double entry works: journal entries, debits and credits, normal balances, running balances, the trial balance, and why posted entries are reversed.Guide · 6 min
- Bank reconciliation step by stepMatch the bank statement to the books, clear deposits in transit and outstanding checks, book the fees, and reach a $0.00 difference every month.Guide · 6 min
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.Guide · 6 min
- Payroll journal entries, from gross to netGross wages, employer taxes, withholding and net pay as journal entries: what each payroll run books, how to accrue it at month end, and where benefits go.Guide · 6 min
- Cash vs accrual accounting for startups, and the IRS ruleCash or accrual for a startup: why investors and auditors read accrual, when the IRS lets a C-corp file on cash, and the 2026 gross receipts limit.Guide · 5 min
- Accounts payable process for startups: intake to paymentHow a bill moves from inbox to paid: intake, coding, approval, scheduling and recording, plus AP aging and who approves what at a 10-person startup.Guide · 7 min
- What to put on an invoice: a field-by-field guideThe fields a B2B invoice needs to get paid on time: legal names, a numbering sequence, dates, terms, tax lines, PO and remit-to, and how to fix one.Guide · 7 min
- AR aging and collections: a practical guide for startupsHow to read an AR aging, work out DSO, run a dunning cadence, record a promise to pay, escalate a late account and clear unapplied cash.Guide · 6 min
- Card and ACH payments: applying and reconciling themHow customer card and ACH payments land in the bank net of fees, how to apply them to invoices, handle partial payments and reconcile the deposit.Guide · 6 min
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.